Fair Pay Agreements Working Group Recommendations

31 January 2019

This report probably confirms the fears of many employers. The Government is yet to draft legislation, so we’re a long way off knowing what we’re really dealing with here.

However, it seems certain there will be a system of bargaining that will result in an FPA for a particular sector or industry. While strike action would be unlawful, once bargaining is initiated an FPA must result because ultimately the ERA or a similar body would have the power to determine an outcome. There is an intention to streamline bargaining with timelines being set in legislation, so avoidance of an FPA by slowing the bargaining process will not be an option either.

As well reported, the minimum threshold to commence the process would only be 1000 or 10 per cent of workers in the nominated sector or occupation, whichever is lower, which isn’t very democratic. The process for determining whether the threshold has been met could be challenging. Once agreement is reached by the bargaining parties, ratification would be triggered by a simple majority of workers being in favour, which again could be a challenging exercise.

Once in force the FPA would apply to all workers in the sector or industry concerned. Imagine the debates about whether a particular business is included in the sector or industry concerned.

The Group also envisages the continuation of enterprise bargaining, but the terms and conditions of an enterprise agreement would be over and above the conditions of any applicable FPA. The process is likely to result in smaller/newer employers being forced to pay more than they can; with second-tier bargaining for those who the workers/unions consider can afford to pay more.

There is a strong argument this is anti-competitive. The report states that “Government will need to consider how to assess and mitigate potential negative effects, including to competition”. This is a bit ironic, considering at the same time the Government is actively looking to identify and deal with cartels and other examples of anti-competitive behaviour.

The Government continues to express the view there only be one or two FPAs before the next Election. How they control that remains to be seen, but the real issue is what happens after that. When you factor in this and other issues like CGT, the next Election is looming as one of very stark contrasts between the parties.

In our opinion, much of the report could be supported bar the compulsion for an employer to be locked in and have their terms and conditions of employment set by other parties, including their competitors. We’ve just witnessed a u-turn on MECA bargaining under the Employment Relations Amendment Act, with employers not being compelled to join a MECA if their opposition is based on reasonable grounds. Either this change was disingenuous, knowing what was coming with FPAs, or perhaps the same sentiment may prevail when the FPA legislation is passed.

You can access a full copy of the report here

A summary of the key recommendations follows:

Initiation

Only workers and their union representatives could initiate bargaining.
The minimum threshold would be 1000 or 10 per cent of workers in the nominated sector or occupation, whichever is lower.
There should also be a Public Interest trigger if there are harmful labour market conditions in the nominated sector or occupation.

Coverage

Coverage of the FPA would be negotiated by the parties.
The FPA would cover all workers in the nominated sector – not just employees – to avoid perverse incentives to define work outside of employment regulation.

Scope

The legislation would set the minimum content that must be included in the agreement.
Parties should be able to bargain on additional terms to be included in the agreement.
Any enterprise-level collective agreement would have to equal or exceed the terms of the relevant FPA.

Bargaining Parties

Parties should nominate a representative organisation to bargain on their behalf.
There should be a role for the national representative bodies to coordinate bargaining representatives.
Representative bodies should represent non-members!

Conclusion, variation and renewal

Where parties reach agreement, conclusion should require ratification by a simple majority of both employers and workers.
Where the ERA, or other body, determines the terms of the agreement, ratification would not be required.
Agreements would be registered and publicly available.
Before an agreement expires, either party should be able to initiate a renewal of the agreement, or for variation of some or all terms.

Enforcement

The Employment Relations Act 2000 approach to enforcement would apply.

You can access a full copy of the report here